Dogecoin (CRYPTO:DOGE) has been all around the information in 2021, and for good motive. By early Might 2021, this meme-inspired cryptocurrency had gained over 12,000% because the begin of 2021. And even now, when Dogecoin is greater than 40% under its all-time excessive of $0.74, it’s nonetheless 6,880% up to date this yr (as of this writing).
However Dogecoin is extraordinarily risky, and isn’t backed by any asset. Its rally has been primarily fueled by Reddit hype and celeb endorsements. Dogecoin has no important aggressive benefit over different cryptocurrencies — be it transaction charges or cost speeds. Retail traders ought to steer clear of such speculative investments to safeguard their portfolios from excessive ups and downs.
As an alternative, I’ve three corporations in thoughts which can be using big secular tailwinds and may develop dramatically within the coming months — all with out considerably growing your portfolio danger. Let’s examine why PayPal Holdings (NASDAQ:PYPL), Lemonade (NYSE:LMND), and Novocure (NASDAQ:NVCR) match the invoice.
A pioneer in digital funds, PayPal has benefited dramatically from the accelerated adoption of e-commerce and digital transactions, a pattern that may probably proceed after the pandemic ends.
On the finish of the primary quarter (ended March 31), PayPal had 392 million lively buyer accounts and 31 million service provider accounts on its platform. As increasingly customers be part of PayPal, the cost facilitator turns into much more unavoidable for companies, which then attracts much more clients. This community impact is tough to disrupt and is a strong entry barrier for competitors.
To draw much more clients, PayPal has targeted on introducing a variety of progressive services corresponding to cashless payment options for in-store purchases together with cost playing cards, QR codes, and tap-and-pay and purchase now, pay later functionality for its PayPal and Venmo wallets. For purchasers utilizing purchase now, pay later, PayPal has famous a 15% enhance in complete cost quantity and 16% decline in value per transaction (since debit funds are cheaper).
Within the first quarter, PayPal income, adjusted earnings per share (EPS), and free money stream soared yr over yr by 31%, 84%, and 27%, respectively. The corporate expects its complete lively accounts to extend by 52 million to 55 million in fiscal 2021 and TPV to leap yr over yr by 30%. PayPal is now anticipating its fiscal 2021 income and adjusted EPS to be up yr over yr by 20% and 21%, respectively, in fiscal 2021.
Buying and selling at 13.6 instances trailing-12-month (TTM) gross sales, PayPal shouldn’t be the most cost effective inventory in the marketplace. Nonetheless, in a world quickly going cashless, this digital funds big will be a beautiful funding for retail traders even at these elevated ranges.
Insurance expertise firm Lemonade’s inventory is over 47% under its all-time excessive of $190 from January as of this writing. Traders are disillusioned by the corporate’s first-quarter (ended March 31) loss ratio (proportion of claims incurred to premiums collected) of 121%, which is dramatically greater than the 71% for fiscal 2020. The property injury brought on by Winter Storm Uri in Texas resulted within the firm processing “a yr’s value of claims in just some days.” Such pure catastrophes are principally unpredictable, though some quantity of draw back will be protected by reinsurance.
Regardless of these challenges, Lemonade has proven progress the place it actually issues. Within the first quarter, the corporate’s complete clients rose 50% yr over yr to 1.1 million, in-force premium (mixture annualized premium) was up 89% to $252 million, and premium per buyer rose 25% to $229. These numbers spotlight the energy of Lemonade’s tech-enabled disruptive customer support mannequin, which permits customers to buy insurance policies and course of claims in a matter of minutes. The corporate’s foray into pet insurance coverage, life insurance coverage, and now automotive insurance coverage has additionally opened a number of cross-selling alternatives.
Lemonade now expects its fiscal 2021 income to rise by 24% to twenty-eight% yr over yr, up from the earlier steerage of 21% to 24%. The corporate additionally maintained its earlier EBITDA loss steerage of $163 million to $173 million, regardless of larger losses incurred within the first quarter. Lastly, the corporate is sitting on a $1.03 billion unrestricted cash pile, which is enough to cowl most of its losses no less than for the subsequent few years.
Lemonade is buying and selling at a wealthy price-to-sales (P/S) a number of of about 59. Nonetheless, contemplating that the corporate collects over 100 times more data from its clients than conventional insurers, Lemonade can leverage its synthetic intelligence (AI) capabilities to develop a a lot stronger buyer expertise and danger administration system. The corporate makes use of AI-based bots and knowledge capabilities for buyer acquisition and claims processing, which helps it cut back its payroll bills. This technology-focused method has enabled the corporate to supply cheaper policies for related protection. Therefore, younger customers (with larger lifetime worth) are more and more choosing Lemonade over conventional insurers. Towards this backdrop, the corporate affords a beautiful risk-reward proposition to long-term traders, even at larger valuation ranges.
Medical machine firm Novocure has give you a singular expertise to struggle aggressive cancers. The corporate’s flagship product is a wearable and transportable machine known as Optune, which works by creating tumor-treating fields (TTFs). These are electrical fields that assist management most cancers cell division with out affecting wholesome cells.
The U.S. Meals and Drug Administration (FDA) has already accepted using Optune for treating mesothelioma (a uncommon most cancers precipitated as a result of asbestos publicity) and for 2 varieties of glioblastoma multiforme (GBM), which is aggressive mind most cancers. Within the first quarter, the corporate’s lively sufferers rose 12% yr over yr to three,454. Whereas GBM is the corporate’s foremost income driver, there may be nonetheless a lot room to develop contemplating that penetration on this indication within the U.S.; Europe, the Center East, and Africa (EMEA); and Japan is barely 37%, 34%, and 31%, respectively.
Novocure’s TTF therapy can be being evaluated in different aggressive cancers corresponding to non-small cell lung most cancers (NSCLC), pancreatic most cancers, ovarian most cancers, and gastric most cancers. Investor hopes are excessive for these pipeline applications, particularly after the FDA allowed the corporate to cut back the enrollment requirement for the management arm within the section 3 pivotal Lunar trial evaluating the efficacy of TTFs in superior NSCLC. This determination relies on an interim evaluation of the trial by an unbiased knowledge monitoring committee. In response to the committee, “it’s probably pointless and probably unethical for sufferers randomized to the management arm to proceed accrual to 534 sufferers with 18 months follow-up.” Whereas the scientific trial knowledge is blinded for Novocure, it’s utterly unblinded for for the information monitoring committee. With the committee contemplating it unethical to refuse TTF therapy to sufferers within the management arm, it appears apparent that Novocure’s product is demonstrating important scientific advantages.
Within the first quarter, the corporate’s income was up yr over yr by 32% to $134.7 million, whereas adjusted EBITDA rose 40% yr over yr to $21 million. The corporate had $864 million of money on its steadiness sheet at finish of the primary quarter. In contrast to many medical expertise corporations with progressive merchandise, Novocure is already worthwhile. In fiscal 2020, the corporate reported a internet revenue of $20 million. Towards this backdrop, regardless of buying and selling at a P/S a number of of over 40, the inventory can show to be a beautiful funding for retail traders.
This text represents the opinion of the author, who could disagree with the “official” suggestion place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis — even one in all our personal — helps us all assume critically about investing and make selections that assist us change into smarter, happier, and richer.